Last year, a new Banking Code of Practice was rolled out, which brought in a higher standard of customer care when dealing with individuals and small-business customers — particularly vulnerable customers, co-borrowers and guarantors. Find out more in this special round-up.
On 1 July 2019, the Australian Banking Association (ABA) introduced a new Banking Code of Practice that brought in a higher standard of customer care when dealing with individuals and small-business customers.
Following on from major concerns surrounding financial abuse, as highlighted during the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, the finance industry has been hard at work developing new training to ensure that vulnerable customers are treated with extra care.
As such, the new banking code now requires lender signatories to “take reasonable steps” to confirm that any co-borrower on a loan not receiving a “substantial benefit from the loan” (e.g. an equitable interest in the asset or payment of debts) understands the risks involved before approving the loan.
Moreover, the code states that lenders would not approve a co-borrower loan in this instance unless they are “satisfied that [they] are not experiencing financial abuse”.
What is financial abuse?
According to ASIC, financial abuse occurs when another person (whether a partner, child, another family member or friend) manipulates a person’s decisions or controls their access to money or other property without consent.
According to the financial services regulator, warning signs of a financially abusive relationship can include:
While lenders had previously been rolling out their own individual requirements to brokers regarding financial abuse – including by asking brokers to complete a financial abuse declaration form, which both the Finance Brokers Association of Australia (FBAA) and the Mortgage & Finance Association of Australia (MFAA) had urged members not to sign due to concerns over potential litigation and professional indemnity insurance breaches – the three associations joined together at the end of last year to develop a “common approach” to working with vulnerable customers.
The joint project of the ABA, MFAA and FBAA culminated in a new training program for brokers that aims to help the channel contribute “more meaningfully” to this effort by providing information on how to identify potential financial abuse more effectively and the new requirements of the banking code.
What the training entails
The online training offered by both the MFAA and FBAA covers some of the sections of the new Banking Code of Practice that are relevant to brokers in order to “provide a significant step-up in protections for customers and in ensuring extra care is taken with customers who may be vulnerable”.
Delving into financial abuse, the training includes:
These examples and tools were drawn from a range of sources, including the content that the banks put their own staff through for the new banking code training, alongside Lifeline resources dealing with how to identify signs of financial abuse.
By working together to build the standardised training, the new module means that brokers can satisfy the lender requirements through their member organisation, without having to undertake training from each individual lender.
The mandatory training is now a professional membership requirement of the MFAA and FBAA (such as AML/CTF training), and an online refresher course will need to be undertaken every two years.
The assessment requires an 80 per cent pass rate.
It is hoped that training will help mortgage brokers:
In a joint statement, the ABA, FBAA and MFAA commented: “The royal commission highlighted the importance of treating vulnerable customers with extra care.
“The training module will help brokers contribute more meaningfully to this effort by providing them with information about the banking code and guidance to help them identify potential financial abuse more effectively.”
More information on financial abuse training can be accessed through the FBAA and MFAA member websites.
Annie Kane is the editor of The Adviser and Mortgage Business.
As well as writing about the Australian broking industry, the mortgage market, financial regulation, fintechs and the wider lending landscape – Annie is also the host of the Elite Broker and In Focus podcasts and The Adviser Live webcasts.
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